Expense

The economic costs a business incurs by its operations to earn revenue. In many cases, business expenses are tax-deductible if they are used directly to facilitate a for-profit endeavor. According to the Internal Revenue Service, a business expense can be deducted if it is both ordinary (common to your industry or type of work) and necessary (helpful and appropriate to the business).

A major calculation in expenses is the cost of goods sold. That includes the costs of raw materials or finished goods, shipping and storage costs, overhead and labor (payments to workers in the form of hourly wages, retirement benefits, insurance, etc.). Finally, you can also generally deduct interest accrued on business-related debt.

EXAMPLE:

Business owner: “Can I deduct my new Tesla as a business expense? I do drive it to and from work.”